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Rationally Speaking is a blog maintained by Prof. Massimo Pigliucci, a philosopher at the City University of New York. The blog reflects the Enlightenment figure Marquis de Condorcet's idea of what a public intellectual (yes, we know, that's such a bad word) ought to be: someone who devotes himself to "the tracking down of prejudices in the hiding places where priests, the schools, the government, and all long-established institutions had gathered and protected them." You're welcome. Please notice that the contents of this blog can be reprinted under the standard Creative Commons license.

Thursday, July 21, 2011

Economics should not be divorced from morality

by Michael De Dora

Last week, our friend Massimo Pigliucci published an essay here in which he argued for an idea I have long thought to be true: that economic considerations cannot be divorced from moral ones. Here is the appropriate passage from Massimo’s article:

“I simply do not buy the fundamentalist (yes, I’m using the term on purpose) libertarian idea that economics is all there is or that should count in pretty much all human transactions and social problems. The hallmark of a just society is precisely that it does consider issues of intrinsic rights — not just to life and property, as the libertarians would have it — but also to health, education, housing and jobs. The whole point of living in a structured society, as opposed to Hobbes’ war of all against all, is so that our lives are not going to be ‘solitary, poor, nasty, brutish and short.’ Which means that what [Larry] Summers dismisses as ‘social concerns’ really ought to be central to the way we structure our societies. Economic systems ought to be the servants of human flourishing, not its masters.”

As it turns out, I have been thinking about the relationship between morality and economics for a couple of months now. However, my thoughts have remained scattered in a Word document sitting in a folder on my laptop with several other essay ideas that are incomplete. Unfortunately, I have been suffering from an extended case of writer’s block coupled with real-world demands (you know, my full-time work advocating for reason and science at the Center for Inquiry). So, I should thank Massimo for piquing my interest in writing again.

The idea I would like to propose in this brief essay is this: economics cannot be divorced from morality because one’s values determine which economic structure he or she prefers. There are no such things as purely economic ends divorced from all other ends because economic decisions are made based on moral values. They also have a moral impact on other people.

At this point, I should define my terms. Morality is the sphere of one’s foundational beliefs and attitudes about right and wrong. Economics is the matter of how to set up and manage the financial situation of a given society or community. I think it is clear that morality, by its very definition, will play a major role in shaping the economic structure of a given society. Morality simply shapes how we approach most things in life, including economics. I also submit that economics is inextricably tied to the welfare of the citizens for which it functions.

But people in several political camps, namely libertarianism and neoliberalism, disagree that economics is so closely linked with morality. They believe economics is a discussion about business and bottom-lines, not ethics. This divide is also present in political news coverage. Take this quote from Mark Caleb Smith, director of the Center for Political Studies at Cedarville University: “Economic issues always dwarf social issues. … [The 2012 election] is shaping up to be an economically driven election with a possibility of foreign affairs entering the discussion as well.” This is precisely how most news outlets and polling organizations frame pre-election public sentiments. How many times have you heard that “people are voting on the economy, not social issues, this election cycle"?

Yet, while economic issues are in some way different than social ones — in the same way that, say, economics and philosophy are two different fields — they are also undoubtedly intertwined at many levels. At the interpersonal level, business transactions hinge on a basic sense of morality. When you purchase something, you trust that your source of information (sales person, gas attendant, waiter/waitress, Amazon.com review) is being honest about the quality of the goods offered. You also expect a certain degree of performance from the product you are buying.

Morality is also present in larger economic debates. Consider the question “how can we create jobs?” At face value, there might be little in this question that concerns morality. It is simply about increasing the number of jobs available to human beings. But what if I answered that the way to create jobs is to eliminate the minimum wage? Or to loosen restrictions on workday hours and factory conditions? Or to lower the tax burden on corporations and the wealthy? Or to repeal last year’s health insurance reform package? These questions all contain a moral aspect as well. Would it be right to allow companies to pay their employees however little they can get away with? Would it be right to rescind worker safety laws? Would it be right to increase the tax burdens on the middle and lower classes and allow further disparity? Would it be right to repeal legislation that increases the availability of health care?

Fortunately, we have a recent example of the public valuing morality over a purely economical calculation: the recent budget debates. Over the past couple of weeks, federal Democratic and Republican leaders have been working to finish a budget deal before the August 2 deadline that would cause the US government to default on its financial obligations. If the deadline is not met, there will be an immediate loss in federal funding for social programs like Social Security, Medicare, and Medicaid. Even if a deal is made in time, those programs could still see budget cuts or qualification changes. Meanwhile, at the state level, New Jersey Gov. Chris Christie’s budget cuts to public education were so drastic that they were ruled unconstitutional. The public has been outraged at every aspect of these potential and actual cuts and changes. The argument: such cuts are immoral given that these are necessary programs that benefit children and the worst off -- especially when there are other options, like taxes on corporations and the ultra-rich, or cutting, for example, the defense budget.

No matter where you stand on these issues, you cannot deny there is a moral component to all of them. Take the issue of taxing the wealthy. Many urge for higher taxes on the rich because they think it is immoral for a small band of people to horde most of the nation’s wealth while the majority suffers. Others argue that the rich should not be deprived of the money they’ve earned (though it should be noted much of this money is inherited or made at the expense of the lower classes through practices put in place by the rich class). Someone might desire to settle the debate by asking, “what is best for the economy?" But my point is that, at bottom, the question of “what is best for the economy” is really a question of “what should we want the economy to do or accomplish?” And that is a question not of pure mathematical reasoning, but of ethical contemplation.

In closing, allow me to spell out how I think the relationship between morality and economics might work. The first step is to figure out our necessary assumptions. For instance, what is the nature of human behavior and desires? How do humans act and interact? The second step is to think about our shared moral goals. I think the U.N. Declaration of Human Rights is a good starting place for that. The last step is then to assess which economic ideas and systems to employ so that our assumptions can be taken into account and that our goals can be realized. Economics is not just about studying and applying knowledge of trends, numbers, math, and business practices. It is also about taking into account the reality of human behavior and our moral concerns before making economic decisions — and then considering the moral consequences of those decisions.

39 comments:

Michael, several of your contentions are ill formulated. First, there is no substantial difference between "economic" and "social": all economic facts are social facts, and economics is a social science. Second, there is no equivalence between "social" and "moral" issues. There are moral issues in all fields of knowledge, such as economics, medicine, genetics, and many more. Third, economics has moral issues, as have other disciplines, inasmuch as it is used to guide action. It is NOT about morals inasmuch as it remains in the realm of POSITIVE (as distinct from NORMATIVE) statements. That bioengineering knows the way to clone a human being (a positive piece of knowledge) just as it knows how to clone a sheep, does not mean that it is morally advisable to clone humans. Likewise, the positive acknowledgement that balancing the books in Greece requires curtailing its public spending by half in the coming three months and remain there thereafter for about 20 years (a positive statement) does not mean that it is morally advisable to proceed in such a way (political and not only moral considerations may advise otherwise). Predicting that Germans would oppose helping Greece, and that Angela Merkel would find it electorally difficult (both positive statements, from political science and sociology) does not mean that Germans SHOULD morally to do so, or that Merkel (politically or morally) should refuse to help Greece. The fact, then again, that some action is not morally advisable does not detract from the truth of the knowledge on which it is based. E.g., refusing to clone human beings does not detract from the science of cloning; refusing to let Greece go to hell does not detract from the objective fact that its current public spending in unsustainable, and its public debt impossible to be repaid on time. "What is there" is different from "What ought to be done". Moreover, the answer to the former is a piece of KNOWLEDGE about objective reality, and as such falsifiable by observation, whereas the answer to the latter is a piece of MORAL BELIEF (or, in some cases, of PRACTICAL/UTILITARIAN calculus), which may be to some degree a matter of opinion and values, not necessarily falsifiable by observation. A Jehovah Witness will still reject blood transfusions, even after seen her daughter die as a result: no state of the world could possibly prove to her that she is wrong in that moral belief; but the resulting state of the world after doing or not doing a transfusion would contribute to corroborating or falsifying existing medical knowledge about the effects of doing or not doing a transfusion in such cases as the J.Witness' daughter. Also, observation of the J.Witness family behavior would add to the knowledge of anthropologists, sociologists of religion, psychologists, cognitive scientists and other students of reality devoted to the study of human beliefs in matters of moral and religion.

"Likewise, the positive acknowledgement that balancing the books in Greece requires curtailing its public spending by half in the coming three months and remain there thereafter for about 20 years (a positive statement) does not mean that it is morally advisable to proceed in such a way (political and not only moral considerations may advise otherwise)."

The "acknowledgment" that you mention is implicitly based on a normative ethics. Some (not all) of the premises of that ethics are:

1) Financial instability should be curtailed.2) Public spending should be curtailed.3) Capitalist institutions, as they currently stand, should be maintained.

I'm not saying that I disagree with those premises (nor am I saying that I agree with them), but these normative premises *underlie* your assertion.

Brian,Those premises do NOT "underlie my assertion". The contention of economic knowledge about Greek public finance is not that "financial instability should be curtailed" (such statement, in fact, betrays a certain degree of economic illiteracy), or that "public spending should be curtailed" (more to the point, but still normative). It only states the commonplace notion that nobody (person, family, government) can permanently spend more than it possess. If the Greek government's revenue is 100, and its spending is 120, that is bound to be corrected at some point, willingly or not, irrespective of ideas or ideologies, just because the capacity to incur additional debt is intrinsically limited, and moreover, additional debt implies additional spending to service and repay the additional debt, which compounds the problem.

Any economic agent MUST ultimately adjust spending to available resources. That is the very definition of economic facts, which deal with the use of SCARCE resources. For resources that are not scarce (I cannot think of any at the moment) economic reasoning does not apply.

Of course, the Greek government may choose not to curtail spending but to apply a tax hike, to raise more revenue. But (positive economic analysis says, based on many past experiences in many countries) such measure would be counterproductive and short lived: it would prolong recession and ultimately reduce tax revenue, besides repulsing investment and increasing the rate of interest on Greek debts. Any economist could technically help the Greek govt to apply a tax hike, if so decided by the Greek Parliament, but that would not make the tax hike useful, or scientifically sound, nor can it detract from the truth of economic knowledge in this matter.

(I split this comment in two because it exceeded the character limit).

(concluding)Regarding your (3), Brian, it is not an economist's role to decide whether capitalist institutions "should" be maintained. Normally economists, just as ordinary people like you and me, live within a certain societal institutional framework, such as the slave-based Roman Empire or current Globalized Capitalism, and can do little about it. Economists normally assume a certain institutional framework as a given, and then study how scarce resources are allocated within that framework.

People, of course, can wish to change the institutional framework, either piecemeal or wholesale. They can organize a political party to adopt policies in that regard, but that would take time and may not succeed, especially when the aims are systemically ambitious. In this case, moreover, there are two additional quandaries: (1) such political party is already there (the Greek Socialist Party), it is actually in power, and it has been applying anti-capitalist policies (such as excessive public spending) for a long time now; (2) the capitalist institutions are not national but global; changing the institutions in one country would normally backfire (look at North Korea and Cuba for attempts to prosper with non-capitalist institutions within a capitalist world). Greece could easily "solve" its problems now by declaring default on its public debt, abandoning the Euro, restoring the drachma, and proceed to issue fiat money until kingdom comes, but that (positive knowledge from any economist) would ruin Greece more, resulting in high inflation and wholesale misery, and would not avoid the ultimate failings of the Greek economy, such as an abundance of low-productivity industries. Applying such measures in only one country, or a set of countries like the EU, is useless and counterproductive in today's world.

Many economists would applaud the goal of abolishing capitalism (I concur myself, wholeheartedly). But not only economists, also sociologists, historians and political scientists would tell you that large-scale institutional frameworks, on which whole economic systems rest, are the result of long historical processes that cannot be changed at will. Spartacus could revolt against slavery, but slavery survived for another half millennium in the Roman world, until economic and political realities got rid of it (and replaced it with feudal serfdom). Peasants in Europe could revolt against feudal serfdom, or merchants against feudal privilege and regulations, during the Middle Ages, but feudalism survived until the 18th century (and in some places like Rusia or Japan until the 19th), to be replaced by capitalism: neither the Hanseatic League nor the Venetian or Genoan republics could implant a capitalist economy in Medieval times. The "why" is difficult to explain, and debatable (Marx had some interesting ideas about it), but that is how things normally are with historic social-economic regimes of these enormous proportions.

Anyway, that does not prevent you or anybody from protesting against the evils of capitalism, or demonstrating before IMF or WTO meeting places, or even imagining better systems, which may seem a worthy endeavor if one believes that economic systems emerge by application of ideals, not by the inner dynamic forces of society (which determine, among other things, which ideals emerge, prosper or fail).

Hector has missed the point as well as Bryan. I don't think De Dora can be said to have had a point about normative and positive economic distinctions, because he is unaware of the distinction in the field.

Fortunately, we have an example at hand to sort this out: "the question of “what is best for the economy” is really a question of “what should we want the economy to do or accomplish?”"

These questions are completely normative. However, there are other economic questions. The most typical class of positive questions are related to efficiency in achieving goals, e.g. What monetary policies will increase employment? What is their effect on prices?

Other mistakes:

De Dora also mangles the term "economics." Economics is the study of how we deal with scarcity. "[H]ow to set up and manage the financial situation of a given society or community" is more appropriately called political economy, although that term is a bit dated in this era of specialization.

The quote about the 2012 election is guilty of the incredibly common mistake using "economics" instead of "finances". (note, see the quote above for the reverse) "People vote their pocketbook" means they have a job and some extra money, not the GDP is currently growing. Now, if most people have a job and some extra money, then the GDP is likely growing, but the reverse is not true. (It's happening right now)

It seems very likely to me that, whatever moral values are driving conservative (e.g. US Republican Party) economic policies, they are either different moral values than mine or they are weighted very differently.

Either way, I agree that policy - be it economic in focus or otherwise - is strongly influenced by moral values,* which is partly why the economics profession seems so divided when it comes to their advising politicians and the public.**

* e.g. see George Lakoff, The Political Mind: Why You Can't Understand 21st-Century American Politics with an 18th-Century Brain

** a practice which sometimes strikes me as a competitive sport: Go Krugman and Stiglitz!

Mufi,for the record, I do not advise governments, companies or labor unions. My job is chiefly to understand (through research) how societies and economies work and evolve, and what results follow from the application of various sets of policies.

The distinction between the "research stance" and the "advise stance", and the further distinction between the "efficiency-usefulness advise stance" and the "moral advise stance", seem to be lost here. One can understand something without advising anything about it (e.g. one can try to understand how the Roman Empire emerged, worked and ended, or how Homo Sapiens evolved), and one also can --unfortunately-- provide advice based on certain values but not necessarily on a sound understanding of reality.

Whilst being in favor of moralization of economics, I think we should be aware of a problem first described IIRC by Karl Popper: Moralization of politics leads to politization of morals. We saw that in the east-block countries before 1990: The initial purpose of communism was to make people happy in (i.e. politics was a pure tool deduced from a theory with happiness as the goal). When practized, nonsense like "socialist morality" started to creep in wherein narrowly defined political targets (e.g. fixed low food prices) were elevated to "moral values" and couldn't be replaced when their time was over.

If we apply this reasoning to the current situation, increasing the discussion about morals in economy might lead the wealthy to try to change the perceived "morality" in order to meet their interests (I think that this is already happening).

Sure, but then my cheer for Krugman and Stiglitz was only partly facetious.

In fact, I cheered them for two main reasons: (1) both are professional economists and Nobel-prize winners; and (2) they apply their expertise to public policy in a way that suggests to me that they share my progressive moral values (e.g. given their advocacy for protecting and/or expanding the social safety net). Were I a conservative, I might have cheered Eugene Fama, Martin Feldstein, or Greg Mankew, instead.

That said, an economist may confront, not only issues of efficiency (as defined in terms of the use of resources so as to maximize the production of goods and services), but also those of distribution and scale, which overlap with other sciences (e.g. sociology, epidemiology, climatology, ecology, etc.) and often have political implications (e.g. if/when a government program is more likely than market forces alone to provide a desirable service).

Of course, an economist must first show an interest in those issues - even if/when the wealthy and powerful do not share those same interests. There is, as Michael suggests, a moral dimension to such interests.

“The idea I would like to propose in this brief essay is this: economics cannot be divorced from morality because one’s values determine which economic structure he or she prefers. There are no such things as purely economic ends divorced from all other ends because economic decisions are made based on moral values. They also have a moral impact on other people.”

Michael,

'Economics,' to use Lionel Robbins' description, 'is a science which studies human behavior as a relationship between ends and scarce means which have alternative uses.' In other words, economics concerns itself with studying how agents utilize various scarce factor endowments to most efficiently, i.e, with the least amount of costs, achieve a the desired ends of the market participants. Now, the ends to which agents put factor endowments are of course determined by numerous things, to include ethical ideals, but economics, as a science, is unconcerned with what type of ends are desired, only with how best to achieve the ends.

If your thesis is to point out that the ends for which agents adopt means are determined by the agents' values, then your essay is remarkably mundane: Every economist whom I have read and with whom I am familiar recognizes this.

However, if your thesis is that agents' values determine the most efficient means by which to satisfy various ends (in a way other than determining those ends), then your thesis is uncontroversially false.

So, e.g., economists qua economists criticize the Greek government not because it wishes to provide various welfare services to its citizens. Rather, economists qua economists criticize the Greek government because it wants to provide various welfare services to its citizens without taking the necessary actions (i.e. increase Greek labor productivity, increase human capital, take better advantage of its comparative advantages, etc.). In brief, the Greeks enjoy a standard of living which does not correspond to their own productive capacities, but rather they have enjoyed their standard of living on Germany and France's dime.

I agree in general with Paraconsistent's comment. However, I have some qualms about the idea that "economists qua economists criticize the Greek government because ...."It is true that any economist (in fact, any commonsensical person) would tell you that one cannot live permanently beyond one's means. But that is not necessarily grounds for a "critique". There are poorer areas in the European Union where the standards of living are uplifted through European aid, in the name of social cohesion and other lofty goals. There are plenty of countries where even the most essential needs are beyond their (current) means and are covered with foreign aid (cf the present predicament of Somalia). Those facts are not sufficient to "criticize" aid given Somalia or European support for depressed European regions. It is something that may be done, in the name of certain values (solidarity, charity, egalitarianism, social cohesion, keeping the people in the countryside, whatever), and it CAN be done if the means exist and can be funneled towards that goal. Of course, it would be difficult if the means do not exist, and the potential donors are reluctant to help. For my part, I abstain from "criticizing" qua economist. I just reckon that the Greek Govt is spending beyond its means, and falling deeper and deeper in debt; from a political-science point of view I may add that political consensus in Greece has been achieved around a socialist platform with ample welfare programs, but without internal mechanisms that contain the spending within affordable limits. The situation is reaching a point in which getting more loans is increasingly expensive, and the economy is in danger of stalling. As the costs of letting Greece fall are staggering for Europe, the rich countries of the EU such as Germany and France would probably find a way out: restructuring the Greek debt to reduce annual payments, requiring Greece to stop incurring in new debt (which in practice implies curtailing spending), and helping European creditor banks to withstand the restructuring and downgrading of Greek bonds. All that is costly, but the alternative is costlier, for both Greece and the rest of Europe. Similar prospects for Italy, with the added irony that its conservative govt has been unable to tackle the problem, so the task would probably fall to its successor, most probably a center-left or wider coalition. In the case of Spain the irony is compounded: the adjustment has been started by the governing Socialists, and disgruntled citizens have little to do except complain in the Puerta del Sol square, because the political alternative is a harsher adjustment under the conservative Popular Party (which is apparently expected to win the coming elections). Left and right are thus increasingly meaningless categories: the Left will often have to apply policies traditionally seen as conservative, if it wishes to preserve what can be preserved of social welfare programs. And in this world of mobile capital, each government (Leftist or conservative) must create conditions suitable for investment, i.e. must "seduce" capital towards its shores, and adapt its policies to that goal, even if it endangers its short term political support.

Today a deal has been attained whereby Greece will get a further 109 bn euro from the EU. That would allow Greece to pay the coming dues, but won't be enough (no conceivable amount will be enough) if Greece does not reduce public spending, because further excess spending will add to the remaining debt, month after month, to no end of troubles. Otherwise it would be like going to the doctor to cleanse your body after a drug overdose, only to go and overdose again the next day or week. No health-care system will pay for that regime, and no human body would survive that ill-treatment for long. As far as I gather, the EU deal requires that Greece reduce spending in the coming months and years, like it or not, as a counterpart to the alleviation of its debt.

Are biologists immoral? Of course they are. They talk of these cruel predators and the horrendous sexual habits of some animals as if nothing were the matter!! And then those anthropologists, describing cannibalism and pagan beliefs as if everything those savages do should be contemplated with equanimity! They should at least should show some moral horror, like any decent person!! And then those astronomers, contemplating the death of the Sun (and of the Earth with it) with such coldness! Not a think devoted to the salvation of all those human souls. And what is one to do, if the Sun is ultimately doomed? Scandalous indeed. O dear dear. We need to instill some morality on all these scientific types.

Michael starts with this observation:>>The idea I would like to propose in this brief essay is this: economics cannot be divorced from morality because one’s values determine which economic structure he or she prefers.<<I'm kind of with you, Michael, but I'd tweak that to say:

Economics cannot be divorced from social psychology because one's take on human nature determines ...

Fama's "efficient markets" hypothesis? The general libertarian ignorance/rejection of the idea the "homo economicus" as an alleged "rational actor" does not exist?

All part of mainstream economics, most strongly articulated on the far right, but, in degree, running as far left as a Krugman or Stiglitz.

Behavioral economists in particular and behavioral psychologists in general continue to show us more and more how "irrational" human economic behavior is.

I would then caveat the conclusion of that paragraph of Michael's with:>>There are no such things as purely economic ends divorced from all other ends because economic decisions are made based on social psychology values.<<Now, to a degree, one's social psychology (substitute a better phrase, like social philosophy: http://en.wikipedia.org/wiki/Social_philosophy if you will) is connected with morals. That said, the connection may be somewhat more tangential than you propose. In other words, one's stance on moral issues in particular, and to the degree one has an articulated moral philosophy, as part of a broader social philosophy, is indeed connected to economics, but, it's a package of social stances, not just morals.

====

That said, Hector's last comment before I submit this, about "immoral biologists," is laughable.

Hector's economic comments on EU states? Wrong. Italy's refused to tackle its problems, Hector; inability isn't the issue, unwillingness is. As for the cost to Europe to back out of a bailout? Germany's been steadily expanding its trade with the non-EU states of Eastern Europe, above all, Russia, as well as with China. Beyond that, speaking of elections, what if the Free Democrats force a no-confidence vote in Berlin?

Just one quick comment: I purposely tried to avoid discussing the quality of different political/economic orientations, and I think we should too (at least here). My main point was this: whether you are a libertarian or a big government liberal, moral values underpin your belief that libertarianism or big government liberalism is the correct position on matters of economics.

>>Even if economists agree, politicians often reject their advice. For example, over 90 percent of economists—irrespective of their personal political leanings—favor freer international trade, but tariff barriers are standard responses when imports threaten significant groups of voters' jobs. A similar consensus exists about most price controls, which include such things as minimum wage laws and the rent controls some cities enforce—most economists view price controls as inefficient. Apparent discord also arises when economists in government agree publicly (but disagree privately) with politicians who appoint them, even if economic logic supports policies the politicos won't enact.<<

Really? Really? (Picture Seth Meyers saying that.)

First, I didn't see a URL on that page linking to any surveys supporting that "90 percent."

Second, "freer" is a slippery word. In 1831 Britain, basically allowing in any American wheat would have been "freer" trade.

Just a correction, Michael, for precision's sake: your last phrase should not be "on matters of economics" but "on matters of economic policy". In matters of economics, i.e. economic analysis, such as the way in which the recent mortgage bubble developed and imploded, there are no moral values involved, just as they are not involved in observing, analyzing and explaining the nuptial rituals used in Ancient Rome, the religious beliefs of native Tasmanians, or recent demographic trends in Latin America. The only values involved are those regarding honest scientific research, and respect for the rights of the subjects observed.

Libertarianism and big-govt liberalism are not positions concerning the analysis of the economy (i.e. scientific analysis of economic reality) , but about what the government ought to do (or abstain to do) in a market economy, and THAT is a political-ideological doctrine that is of course influenced by moral values.

Hector, if there is such a neat dividing line between "scientific analysis of economic reality" and "political-ideological doctrine", then I would expect to find little correlation between economic theory and policy advice. Yet, theoretical debates in economics seem to play out on the political stage; e.g. in what Krugman likes to portray as an ongoing struggle between "salt-water" and "fresh-water" economists (which alludes to the schools of the US coasts and the University of Chicago), which roughly dovetails with the Keynesian and neoclassical traditions, particularly as they relate to macroeconomics.

If Krugman is right about that (he'd know better than I), then economists' advice on public policy reflects (at least to some degree) a theoretical divide at the academic (not to mention private think-tank) level [which, of course, does not rule out a compartmentalization scenario, where the implications of an economist's own research conflicts with his political loyalties].

What's more interesting to me is: To what degree does this theoretical divide reflect economists' prior positions on public policy (to which there is an obvious moral dimension)?

It does not at all seem clear to me there are 'moral dimensions' to the theoretical differences between, say, neo-Keynsian, neoclassical, and rational expectations approaches to economics.

Michael,

Re: 'My main point was this: whether you are a libertarian or a big government liberal, moral values underpin your belief that libertarianism or big government liberalism is the correct position on matters of economics.'

First, thank you for the clarification. Second, I agree with Hector, for the sake of clarity '... matters of economics' should read '... matters of economic policy.'

I should like to point out that though moral values influence matters of economic policy, in many instances economics proper influences economic policy. Take Paul Krugman, an ostensibly liberal progressive, and his critique of rent control.

It is not that Krugman believes families ought not to have affordable, quality housing (I am sure he doesn't), but, through his economic analyses, he realizes that rent control policies are counter productive to their ends and, what is more, create unintended (but predictable) negative consequences.

P, I working on the assumption (based partly on my reference to Lakoff above) that, to a large extent, policies follow from moral values, such that differences in moral values (e.g. different priorities) can lead to differences in policy preferences.

That said, my unscientific impression (shaped by many years of observing political rhetoric in an anglophone context) is that political progressives tend to be drawn more towards the Keynesian tradition and the political-economic advice that follows from it, whereas political conservatives tend to be drawn more towards the neoclassical tradition and the political-economic advice that follows from it. (Of course, this picture is over-simplified, as evidenced by the Marxian and Austrian schools, but it seems apt enough for my immediate purposes.)

I suppose it's possible that this phenomenon (if actual) is merely accidental. But I suspect that it's about as accidental as, say, a progressive preference for hybrid cars vs. a conservative preference for trucks or SUV's. Such preferences reveal something an individual's or group's distinct moral priorities.

Mufi,Of course there is a correlation between political ideology/values and the school of scientific though one tends to embrace (when there are several and the subject is contentious). In Economics, certain research programs attract people with specific policy agendas, but that also occurs in other sciences. In evolutionary biology, for instance, Stephen Jay Gould's rejection of what he called "adaptationism" allowed him to argue that not everything in a species makeup is determined by natural selection, in tune with his political ideas and his desire to maintain religion and science as peacefully coexisting "magisteria". Politically minded utilizations of Darwinian ideas by eugenicists and "social selectionists" in the 19th and early 20th centuries are also known. People with an ideological agenda tend to cherry pick some themes, and some approaches. But if they want to be good scientists they should strive to keep an open mind in matters scientific. For instance, if you are a committed environmentalist, actively campaigning for a carbon tax and reduction of greenhouse gas emissions, you may balk at research that in some way dilutes the message that the climate is warming in an unprecedented manner (for instance, any papers suggesting that current warming is not unprecedented, and that previous warm periods came and went without catastrophic effects; or research surmising that climate projections are afflicted by large uncertainties and dubious assumptions). On the other side, if you are a libertarian right-winger that would hate a carbon tax, you'll probably look preferentially for research strands that in some way weaken the existing scientific consensus about global warming. But in any case, if you're honest enough, you should be ready to recognize virtues in good research, even if it goes against your preferred policy/political views.

If that occurs in climatology or biology, it is bound to happen too in economics. The idea that a higher minimum wage might generate more unemployment, though rather uncontroversial among economists, is somewhat politically incorrect if you're in a "liberal" environment (in the American sense of the word), and thus center-left economists may probably avoid insisting on that particular piece of economic knowledge. But science progresses through discoveries, finding holes or weaknesses in theories or new facts in reality, challenging conventional wisdom with often implausible ideas (e.g. that the Earth moves or Man descends from apes, or that protecting jobs in your country through higher trade barriers may end up destroying more jobs than it protects). Being open to these new and often paradoxical ideas is the mark of a good scientist.

@ccbowers ... no, if Michael had changed "economics" to "economic policy," or even used a more socially-encompassing term than "morals," it probably wouldn't have made a difference. This quickly would have become a political argument first.

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Michael ... don't be a "stereotypical liberal" and apologize when, even if you had been clearer, it wouldn't have changed most the responses.

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@Hector ... another old canard there about the min wage. Remember how many jobs America lost when Clinton raised it? Yep, I thought you'd probably forgotten about that job growth. Behind the much-longer-than-others posts you make here, there's usually ultimately a political agenda behind your claims, too.

If folks were not so quick to cite economists in support of their pet policies - which usually happen to be friendly to the rentier class and austere towards everyone else - perhaps the comments might have been less politicized.

I disagree. Michael's imprecision changed the affair from what would have been a true, albeit trivially true, observation to an impugnment of the scientific nature of economics. (Although, Gadfly, I suspect it likely that the discussion may have been politicized nevertheless.)

P.S.

Gadfly,

Re: 'Remember how many jobs America lost when Clinton raised it? Yep, I thought you'd probably forgotten about that job growth.'

Let us be mindful to keep away from those pesky post hoc ergo propter hoc fallacies.

The only branch of economics that's scientific is behavioral economics. And, the "this is what the rule book says *should* happen" Chicago School types still ignore its main finding:

And, it's no fallacy to point out that Clinton raised the min wage and we had no job loss, but rather, more job creation. Rather, it's citing the latest of many clear counterexamples of how min wage hikes don't cause job losses.

That said, people who claim that often speak out of both sides of their mouths.

They say that it will cause such great job losses as a reason not to raise the min wage, while at the same time saying it only affects such a small number of jobs that we shouldn't worry about it anyway.

Three things to say here. First, the general lack of external validity of behavioral economics is such that no meaningful predictions can be gleaned and, what is more, it offers little in explanatory framework.

Second, you misrepresent economics generally, and neoclassical economics in particular, through what I can only describe as a remarkable ignorance regarding how economists go about gathering data, creating models, and making inferences therefrom. Have you ever studied econometrics or researched the ways economists gather data?

Third, no economist asserts that if the minimum wage is increased there is an overall decrease in employment, regardless what else occurs in the economy, yet that is what they must assert if the increase in overall employment during the period specified is to serve as evidence against the proposition that mimimum wage laws distort labor prices, induce employers, all else equal, to demand less labor, induce more individuals to enter the labor market, and cause wage rates to decrease in other, non-miminum wage rate sectors.

What else occurred during that same time period and within 10-15 years before? Did labor productivity increase? Did capital investment increase? Did the increase in capital invest 10 years prior allow for McDonald's etc. to decrease production costs and thus expand and thus demand more labor despite the increase in the minimum wage rate? In which sectors did employment increase and why?There are hundreds of other factors to be considered here before one can make pronouncements about the efficacy of Clinton's minimum wage increase.

Re: 'They say that it will cause such great job losses as a reason not to raise the min wage, while at the same time saying it only affects such a small number of jobs that we shouldn't worry about it anyway.'Not one economist I am aware of has ever said that raising the minimum wage rate incrementally will lead to 'great job losses.'

Really, Gadfly, your ignorance on this matter is profound. I generally tend toward civility on the blog, as most who have read my comments can attest, but I really suggest that you know what you are talking about before you decide to make yourself look like a fool for all to read.

One of the biggest problems with economics or at least "Main Stream" or "Keynesian" economics is that they treat economics as a science like physics or biology.

I am begging you, if this subject really interests you, then you start by resolving the epistemilogical problems of economics. This is a road I started to travel about a year or so ago and it is quite fasinating. Thus it has converted me to one of those dreaded Libertarians.

In my search to understand economics and answer the question of how one can define it I have found Ludwig Von Mises. He is a not so well known (perhaps becuase he is Libertarian and his successors have fully refuted Keynes and dismantled his "General Theory" into little more than the rumblings of an idiot, so our whole political/economic idea of spend us to economic health gets shot down).

Mises most famous book "Human Action" should be the bible for economists. Mises breaks down economics into a science he called "Praxeology". Which in short is the study of Human action. Keeping in mind this is fully seperated from Psycology. It is the idea that "Man acts to dispeal feelings of uneasyness". In a content state, man does not act. The study of this action or collection of actions is economics.

Another good read from him "Epistemological Problems of Economics" is a must if you truely want to define philisophically what economics is and is not.

I will spare the Libertarian Vs Liberal debate (since its been done a few times here), but want to make one simple comment.

You delve into post about morality yet never resolve a simple contradiction in your moral system. You gloss over property rights, right into the right to health care etc... You never resolve how one can have property rights yet simulatniously have rights to someone elses property? How can one have a right to health care, if the health care is owned by someone who gives it. For instance, lets say you and I live on an island and your a doctor and I am a farmer. How can I have a right to your services and you also have a right to own your own means for production? How can health care be a right and simultaniously we have a right to our property? Oh thats right, you never defined it. Libertarians have no such contradiction. You who spout off about morality, yet as a condition of that morality, we must all prescribe to the idea that somehow the right to healthcare supercedes the right to property. If I make more than $250,000 per year then your right to healthcare is more important than my right to my labour. Or is it a million? What is your completely arbitrary limit on the right to property again? or is it just all out marxism and we dont have any right to our labour and property?

The other fallcy you talk about (because you have no understanding of economics) is this idea that the few can amasss so much of the populaces wealth (as if they are taking it from others). What you do not realize (again, becuase you dont understand economics) is that in order for one to become wealthy, they MUST, make others more wealthy. Again (for simplicity) say you and I live on an island and were both farmers. We both produce about the same food in our farms and so on. Lets say I develope a new machine that does all my farming work for me and I can now produce 2X the food I need. The only way I can use this excess food is to trade it. The only way you will trade some other valuable you own for my excess food is if that other valuable is worth less to you than your time for working the farm. Lets say now you must make all my cloths and in exchange I supply your food. Yes, now I am more wealthy than you, but you are also more wealty than you were (becuase you obviously prefer making my clothes than you do to growing all your own food). This is exactly the same when applied to macro economics. Wealthy people (in a free market economy) can not get wealthy without raising the over all wealth of all others than themselves. This is the truth, but becuase your lacking the understanding of economics and Praxeology, you see it as there is some finite amount of wealth and people are hogging it. Despite this truth, your liberal ideology will not let you accept how to improve the overall wealth of society. Letting market economy (without any state intervention) is how you grow wealth for everyone.

This is why I beg people to read Mises. Modern economics claims to be able to be predictive. Mises claims this is not a quality of the science due to its nature. Yet in 1927 and 1928 he was the only econimists (that I know of) that was warning of the great depression. His wrote about the Boom and bust cycle and was explaining about the Feds printing causing misalocating of resources while all the mainstream economists citied the Feds printing in the 20's as the end of recessions.

Hardly any economists (so even the Mainstreamers can understand this) thinks minimum wage helps the poor, yet becuase you think you can centrally plan propserty you cant let it go. each and every moral question you raise shares the same fallacy. In each situation the market economy would help the poor better, its the arrogance of people that think they can plan properity better than people can in a free society can. Your morality is the most immoral thing you own, because its killing the propserity of the very people you claim to think you can help.

Sorry, I said I would spare it, but I guess I didnt. it is a subject I am passionate about because I think Liberal "morality" being forced on our economic system is what is destroying our economy. Health care will get far worse when it is a right. You cant have a moral system that begins with theft or people having rights to other peoples production, and somehow claim your now morally better than you were.

Economics is a science. It is completely absent of values (or morals as Michael seems to think it shouldn't be). This is why if you want to study economics you should study Austrian prospective, it is the only prospective that makes the claim economics must be value free. Would you study biology or physics and insists it cannot be divorced from morals? Of course not. F equals MA is just a formula or you could say a law of physics. Motion was studied and this formula was the result of observation. Economics is a science. The main difference is that laws of economics tend to be more Apriorism than positivism. Such as the law of marginal utility, "in a free market an exchange will only take place if the marginal utility is higher for both parties. This statement could be proved and disproved if the epistemological system was positivism. This is why economics must use a aprioristic philosophy. But never the less, economics is still a science and the law of marginal utility is still true. So Michael, to say economics must not be divorced of morality, is to say economics is not a science. That is absurd. This is why liberals hate real economics or Austrian economics. It is a science that tells you that socialism reduces over all wealth (even for the poor). It is the science that tells you that if you increase minimum wage, you will reduce employment (even for the poor). So rather than listen to what the laws of economics tells you (just as if increasing force increases either Mass or acceleration in F equals MA) you come up with absurd statements like "economics should not be divorced from morals". How can you call yourself a skeptic and say such a thing. It's like saying we must consider morals to study E equals MC2.

The curious fact is that no matter what its basic economic theory (libertarian, socialist, capitalist, etc) every government and ruler ends up with subsidies to farmers, which invariably contradicts the basic theory, in order to ensure a good supply of food and reduce the chance of famine. When it comes to the basics of life, economic theory takes a back seat to preventing death by starvation. (I omit the communists, since millions starved in Stalin's Russia and Mao's China.) I have never heard any economist give a rational market-neutral reason why any farm supports should exist at all.

Economics is synonymous with ethics, as when one says he has economic regard on an issue, he is saying he has ethical regard on the issue. Every person acts in dispensation, that is in household administration of things civil, monetary and political, and these action come from one’s convictions in philosophy or religion. Thus economics is either a philosophy or a religion; it is defined as the quality and type of ethical experience present between a person, and another or others, corporations and the state, that is government.